Gap builds on Athleta and Old Navy as it leaves UK and franchises in France and Italy

Casual fashion group Gap Inc. has confirmed its intention to leave the UK and Ireland and transition to a franchise model in the main European fashion markets of France and Italy.

The move follows a review launched in the fall, when Mark Breitbard, director of Gap brand global, admitted that one of the options explored was the possible closure of its Gap stores operated by the company in the UK, in France, Ireland and at the end of the second quarter in 2021.

And as a result, Gap will close all of its 81 stores in the UK and Ireland, with the estimated loss of over 1,000 jobs, ending an in-store presence that dates back almost 35 years.

While Gap has pointed out that the move is part of its 2023 power plan to rejuvenate the struggling business, it’s hard not to conclude that it was simply foiled by European and Asian fast fashion brands, which have always been more trendy and cheaper. than Gap and its sister brands.

The question he leaves is where is the next step for Gap Inc., a fashion brand that has come to define the smart casual wear more casual of the 1980s and 1990s under the auspices of founder Donald Fisher and the luminary of Mickey Drexler retail, which drove its rapid expansion at the end of the last century?

Gap prepares for UK exit

San Francisco-based Gap Inc. said stores will close between late August and late September this year, but will continue to operate its online store in the UK and Ireland.

In France and Italy, the company said it intends to transfer parts of the business to interested third parties as part of a proposal to expand the partnership model. Through the franchise, Gap is already reaching customers in 35 countries with more than 460 stores, 14 stand-alone e-commerce sites and over 160 multi-channel or pure play e-commerce sites.

Gap, which also owns Banana Republic, Old Navy and Athleta, has been forced to close stores around the world due to the pandemic, with a total of 204 stores permanently closing in 2020 and the retailer said in October that it would close 30%, or 350, of its Gap and Banana Republic stores in North America by January 2024, as it reduces its exposure to shopping malls. In other recent downsizing, Gap Inc. recently sold its Intermix and Janie & Jack brands and closed its Hill City brand.

Instead, Gap plans to focus on its Old Navy and Athleta brands, with hopes of opening at least 50 additional locations by the end of 2021 and turning those into a $ 2 billion company. over the next few years. To achieve this, Gap Inc. plans to open approximately 100 Athleta stores in the United States, bringing it to nearly 300 locations.

Mary Beth Laughton, President and CEO of Athleta, called Athleta’s stores “very profitable,” while online accounts for more than 50% of its business and is growing in double digits. The company also plans to expand Old Navy sales to $ 10 billion by 2023, from $ 8 billion at the end of 2019, which would mean Old Navy and Athleta’s revenue was roughly 70% of sales. Gap Inc. sales by 2023, up from 55% in 2019.

Gap Inc.’s official statement confirms plan

While Gap Inc. lost $ 665 million in the year through the end of January 2021, in a more promising first quarter update, comparable sales for 2021 were up 28% year-on-year, in 13% increase from 2019, with net sales of $ 4 billion. up 89% from 2020 and 8% ahead of pre-COVID 2019 levels.

Confirming its withdrawal from Europe, Gap Inc. said in its statement: “As part of our ‘2023 Power Plan’, Gap initiated a strategic review last year of the business operated by the company in Europe with the aim of to find new, more profitable activities. means of maintaining a presence and serving customers in Europe.

“The company is in negotiations with Hermione People and Brands, the retail arm of the FIB group, to take over the Gap stores in France. In Italy, we are in discussions with a partner for the potential acquisition of our Gap stores and look forward to sharing more information when it becomes available.

“In the UK and Europe, we will maintain our Gap online business. The e-commerce business continues to grow and we want to meet our customers where they shop. We are becoming a digital premier company and we are looking for a partner to help us grow our business online.

Gap has been present in the UK since 1987 and in the Republic of Ireland since 2006 and has said it is ‘keen to maintain our presence in these markets’. Gap Inc. previously closed all of its Banana Republic stores in the UK in 2016.

With no physical presence in the UK, it seems difficult to see how Gap can realistically sustain sales, given fierce competition from established players and a growing list of fast fashion brands only online. While its repositioning in North America has been generally well received by analysts, this week’s announcement clearly sounds like a long farewell to Gap in Europe.